Achieving sustainable and profitable growth through organic exploration and joint ventures
1. Achieving a sustainable and profitable growth strategy
for Lundin Petroleum
Jomadati & Sons
Tim Gudrais
Jonas Halldén
Darko Draskovic
Martin Stenberg
2. By focusing new investments on a combination of organic growth and joint
venture, Lundin Petroleum gains 12 billion barrels additional capacity
Jomadati & Sons
Challenge Retaining a high growth rate
Darko Draskovic
Tim Gudrais
Jonas Halldén
What growth strategy should we pursue in the Martin Stenberg
Question future in order to increase to increase
shareholder value?
Saturating supply of petroleumand limited oil
Complication
sources
Focus 80% of new investments on organic
exploration in the Nordic and Arctic regions and
Answer
20% on joint ventures in Africa and Latin
Amerika
3. Chosing a strategy that combines organic exploration and joint
ventures Lundin Petroleum maximizes growth while managing risks
Extract existing Organic growth Expand through
Joint venture
oilfields through exploration acquisiton
Revenue growth
Sustainability
Initial costs
Risks
Choice of strategy with high growth, high sustainability and managebale risks
4. General trends include economic, political and technological
factors important to consider
General trends &
Value drivers
Global economy Political decisions Technological changes CSR
Oil price Exploration rights Investments Transparency
- Supply & demand
- BNP
- Proactive towards - High credability - Skilled labour force - Investor relations
the market - Financing - Retailers - PR communications
- Relations with
decisionmakers
5. Industry analysis
Estimated petroleum demand Competitor enterprise value Stockprice development
• Great potential in the market in two business cycles (8 years)
• Value in joint venture do to competition with high enterprise value
6. By investing in new exploration in Latin Amerika, the Arctic, Afrika
and the Nordic region, Lundin achieves high growth and diversified
risks
Today New exploration
7. By using 80% of our investment budget for future organic growth in
the Nordics and Arctic region, we reach ca 290% ROI
•High prior results
Advantages •In-house knowledge of the region
•Strong Returns
•Highly dependable on new findings
Disadvatages •Low risk diversity
•High capital requirements reducing ROI
Important •Geographic: Nordic & Arctic region
•New exploration and findings
Factors •Financing
•3 new oil-field findings in the next 3 years
Results •Total Capacity: 7 mlrd varrels
8. Joint venture with a state will lead to CSR, political and risk
sharing benefits
Growth expectations Financial benefit JV beneficials
• To keep up with the • The main financial • Minimising risks
growth expectations benefit for with JV • Minimising political
of the hareholders, would be licencing issues
Lundin cannot rely costs in attractive • Shared financing
only on their currect areas.
• CSR work
exploration rights.
9. Compared to organic growth we estmate that a
JV could yield a higher and more secure return
ROI % estimate
450
400 • 33% higher return with JV
350
300 • Potentially 5 billion BOE worth
250 of findings.
200
150
100
50
0
Regular JV
Investment
10. Future risks and how to deal with riskmanagement
High
1 Volatility in oilprice
4
2 Financing
1
Impact
3 5 3 IR and PR
2 4 Future findings
Low
Small Probability High 5 Political deicisions
11. By focusing new investments on a combination of organic growth and joint
venture, Lundin Petroleum gains 12 billion barrels additional capacity
Jomadati & Sons
Challenge Retaining a high growth rate
Darko Draskovic
Tim Gudrais
Jonas Halldén
What growth strategy should we pursue in the Martin Stenberg
Question future in order to increase to increase
shareholder value?
Saturating supply of petroleumand limited oil
Complication
sources
Focus 80% of new investments on organic
exploration in the Nordic and Arctic regions and
Answer
20% on joint ventures in Africa and Latin
Amerika
13. Investment Calculation
Organic JV Total
Prospectation Inv. 112000000 28000000 140000000
Oil field size 2500000 2500000
# New Findings 3 2
Total Barrels 7500000 5000000
Oil Price 110 110
Revenues 825000000 550000000
Profit Margin 40% 40%
Profit 330000000 110000000
ROI 2.946428571 3.928571429
ROI % 294.6428571 392.8571429
14. Organic Acquisition
+ So far so good + Tillflöde av kompetens
+ Kompetens + Stor del av arbetet gjort
+ Strong returns - Lower return
- Highly dependable on new findings Faktorer:
- Lågt diversifierad portfölj Oljepris
Financing
Vart ska vi leta?
Afrika Joint venture
+ Bättre riskdiversifiering
Arctic
+ Mindre kapitalkrävande
Lat. amerika
+ Politik
15. BNP globalt Oljeprisutveckling
Supply & Demand
Political
General trends /
Valuedrivers Technological
CSR
Customer power
Industry analysis Supplier power
competition
substitute
Organic
Growth Acquisition
Joint venture